On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act. The Tax Act reduced the corporate federal tax rate from 35% to 21% effective January 1, 2018 and implemented a modified territorial tax system. As part of the Tax Act, U.S. companies are required to pay a one-time transition tax on the deemed repatriation of undistributed foreign earnings and to remeasure deferred tax assets and liabilities.

The Tax Act includes a mandatory deemed repatriation of all undistributed foreign earnings that are subject to a U.S. income tax as part of the transition. For the fiscal year ended June 30, 2018, the Company recognized provisional income tax expense of $9.6 million for a one-time transition tax liability on total post-1986 foreign subsidiaries’ earnings and profits (“E&P”) that were previously deferred from U.S. income taxes. The Company completed its analysis for this item within the permitted measurement period under the guidance of Staff Accounting Bulletin No. 118 (“SAB 118”) and determined an adjustment was necessary. As a result, a discrete tax benefit for $0.2 million was recorded during the quarter ended December 31, 2018. The Company will continue to distribute the earnings of its Canadian subsidiary, but earnings from all other continuing operations foreign geographies will continue to be considered retained indefinitely for reinvestment. For Latin America and Europe, where the Company has discontinued operations, when these entities are sold, the Company intends to repatriate the earnings to the United States. It has been the practice of the Company to reinvest those earnings in the businesses outside the United States.

As part of accounting for the Tax Act, the Company remeasured certain deferred tax assets and liabilities based on the rates at which such deferred taxes are expected to reverse in the future, which is generally 21%. For the fiscal year ended June 30, 2018 the Company recognized provisional discrete income tax benefit of $1.6 million for the remeasurement of the Company’s deferred tax asset and liability balances. The Company completed its analysis for this item within the permitted measurement period under the guidance of SAB 118 and determined that the provisional amount should not be adjusted.

The Tax Act created a provision known as global intangible low-tax income ("GILTI") that imposes a tax on certain earnings of foreign subsidiaries. The GILTI tax became effective for the Company during fiscal year 2019 and an accounting policy election was made to treat the tax as a current period expense. The Company recognized GILTI tax of approximately $0.1 million and $0.4 million for the fiscals years ended June 30, 2020 and 2019, respectively.


	Fiscal Year Ended June 30,
	2020		2019		2018
	(in thousands)
Current:
Federal	$	13,892	$	18,223	$	38,476
State	3,244		4,459		3,504
Foreign	1,188		(2,342)		7,481
Total current	18,324		20,340		49,461
Deferred:
Federal	(8,526)		(4,913)		(10,336)
State	(2,667)		(945)		(2,025)
Foreign	320		4,296		(9,507)
Total deferred	(10,873)		(1,562)		(21,868)
Provision for income taxes	$	7,451	$	18,778	$	27,593

A reconciliation is provided below of the U.S. Federal income tax expense at a statutory rate of 21% for the fiscal years ended June 30, 2020 and 2019 and a blended statutory rate of 28% for the fiscal year ended June 30, 2018 to actual income tax expense. Since the Company has a June 30th fiscal year-end, the lower tax rate resulted in a blended U.S. statutory federal rate of approximately 28% for the fiscal year ended June 30, 2018.


	Fiscal Year Ended June 30,
	2020			2019			2018
	(in thousands)
U.S. statutory rate	21.0		%	21.0		%	28.0		%
U.S. Federal income tax at statutory rate	$	(15,073)		$	17,564		$	17,690
Increase (decrease) in income taxes due to:
State and local income taxes, net of Federal benefit	1,316			2,864			1,968
Tax credits	(1,419)			(1,324)			(1,825)
Valuation allowance	1,699			57			1,304
Effect of varying statutory rates in foreign operations, net	1,374			1,938			320
Stock compensation	41			35			1,049
Capitalized acquisition costs	59			69			48
Disallowed interest	1,639			1,600			1,664
Earnings from foreign subsidiaries	1,661			50			120
Net favorable recovery	(6,517)			(3,112)			—
Global intangible low taxed income (GILTI) tax	(128)			365			—
Non-deductible goodwill impairment	20,180			—			—
Nontaxable income	—			(822)			—
U.S. Tax Reform transition tax	—			(827)			9,609
U.S. Tax Reform impact of rate change on deferred taxes	—			—			(2,701)

Other jurisdictions impact of rate change on deferred taxes	—			(20)			—
Other	2,619			341			(1,653)
Provision for income taxes	$	7,451		$	18,778		$	27,593


	June 30,
	2020		2019
	(in thousands)
Deferred tax assets derived from:
Allowance for accounts receivable	$	6,466	$	7,387
Inventories	3,226		3,255
Nondeductible accrued expenses	11,109		9,054
Net operating loss carryforwards	3,083		73
Tax credits	6,734		6,046
Timing of amortization deduction from goodwill	12,516		6,406
Deferred compensation	7,247		6,396
Stock compensation	3,034		3,034
Timing of amortization deduction from intangible assets	4,145		3,110
Total deferred tax assets	57,560		44,761
Valuation allowance	(9,195)		(4,447)
Total deferred tax assets, net of allowance	48,365		40,314
Deferred tax liabilities derived from:

Timing of depreciation and other deductions from building and equipment	(3,347)		(6,618)
Timing of amortization deduction from goodwill	(7,390)		(3,742)
Timing of amortization deduction from intangible assets	(16,882)		(14,507)
Total deferred tax liabilities	(27,619)		(24,867)
Net deferred tax assets	$	20,746	$	15,447

As of June 30, 2020, there were (i) gross net operating loss carryforwards of approximately $1.8 million for U.S. federal income tax purposes; (ii) gross state net operating loss carryforwards of approximately $2.0 million; (iii) foreign gross net operating loss carryforwards of approximately $8.2 million; (iv) state income tax credit carryforwards of approximately $2.6 million that will began to expire in the 2020 tax year; (v) withholding tax credits of approximately $4.5 million; and (vi) foreign tax credits of $0.1 million. The Company maintains a valuation allowance of $0.4 million for U.S. federal income tax purposes, $2.7 million for foreign currency translation adjustments on impairment charges, $0.3 million for foreign net operating losses, a less than $0.1 million valuation allowance for state net operating losses, a $4.5 million valuation allowance for withholding tax credits, a $0.1 million valuation allowance for foreign tax credits, and $0.3 million valuation allowance for state income tax credits, where it was determined that, in accordance with ASC 740, it is more likely than not that they cannot be utilized.

The Company adopted ASU 2016-09 during fiscal year 2018 which required the Company to recognize excess tax benefits and tax deficiencies as income tax expense or benefit for stock award settlements that were previously recognized as additional paid-in-capital. As a result of these changes, the Company recognized net tax expense of less than $0.1 million for the fiscal years ended June 30, 2020 and 2019 and $1.0 million for fiscal year ended 2018, respectively.

As of June 30, 2020, the Company had gross unrecognized tax benefits of $1.2 million, $0.9 million of which, if recognized, would affect the effective tax rate. This reflects a decrease of less than $0.1 million on a gross basis over the prior fiscal year.

The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the accompanying Consolidated Income Statement. Accrued interest and penalties are included within the related tax liability line in the Consolidated Balance Sheet. The total amount of interest and penalties accrued, but excluded from the table below, were $1.1 million, $1.0 million and $1.2 million for the fiscal years ended June 30, 2020, 2019 and 2018, respectively. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:


	June 30,
	2020		2019		2018
	(in thousands)
Beginning Balance	$	1,234	$	1,703	$	1,826
Additions based on tax positions related to the current year	137		69		157
Additions for tax positions of prior years	—		—		—
Reduction for tax positions of prior years	(215)		(538)		(280)
Ending Balance	$	1,156	$	1,234	$	1,703

A Supplemental Law was issued in Brazil during the Company's fiscal year 2019 which affirmed that Brazilian state-provided benefits are not subject to income tax. The Company recorded, discrete to the June 30, 2019 quarter, an income tax benefit of $3.1 million related to the confirmation of the recovery of state-provided tax benefits. During the fiscal year ended June 30, 2020, the Company determined that the Supplemental Law was applicable to prior periods. As a result, the Company recorded, discrete to the June 30, 2020 quarter, an income tax benefit of $2.8 million related to the recovery of prior period state-provided tax benefits.

Discrete to the June 30, 2020 quarter, the Company recorded a tax benefit of $3.7 million for the reversal of a contingency related to certain tax credits with respect to the calculation of PIS/COFINS gross receipts tax related to its Brazilian operations. This tax benefit is a result of several favorable court decisions issued regarding these credits.

The Company conducts business globally and, as a result, one or more of its subsidiaries files income tax returns in the United States federal, various state, local and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities in countries in which it operates. With certain exceptions, the Company is no longer subject to state and local, or non-United States income tax examinations by tax authorities for tax years before June 30, 2015.